Judge in Twitter Case Issued Rare Order Forcing Deal to Close — Now, Some Say Musk Could Go to ‘Jail’

Judge in Twitter Case Issued Rare Order Forcing Deal to Close — Now, Some Say Musk Could Go to ‘Jail’

Elon Musk’s hostile takeover bid to buy out Twitter and take it private may run into legal trouble; that is, if the billionaire tech CEO doesn’t have a trick up his sleeve.

The judge in Musk’s case has presided over similar acquisition cases and has issued a rare order to force the prospective buyer to close the deal.

“Kathaleen McCormick, the chief judge of Delaware Chancery Court, will play a key role in determining whether Musk will be forced to honor his original $44 billion agreement to buy Twitter – despite his attempt to back out due to spam bots in the company’s user base,” the New York Post reported.

“McCormick’s history as a decision-maker could have implications for the Musk-Twitter battle,” the Post added. “She is one of the few judges on record to have ordered the closure of a deal after one corporate entity tried to back out, Reuters reported, citing legal experts and available court documents.”

“Last year, McCormick compelled a subsidiary of private equity firm Kohlberg & Co. to complete a $550 million deal to buy DecoPac Holding Inc., a company that makes cake decorating products,” the report added.

Elon Musk announced in early June that he would abandon his $44 billion Twitter offer after the company failed to provide satisfactory information about fake ‘bot’ accounts. Twitter sued the Tesla CEO to force him to uphold the deal.

The puckish tech CEO may be forcing Twitter to reveal the information in court, however, which would possibly tank the value of the company and set the social media giant up for a less pricey takeover.

“Twitter could have pushed for a $1 billion breakup fee that Musk agreed to pay under these circumstances,” the AP reported about the fallout. “Instead, it looks ready to fight to complete the purchase, which the company’s board has approved and CEO Parag Agrawal has insisted he wants to consummate.”

In a letter to Twitter’s board, Musk’s lawyer Mike Ringler complained his client had sought data to determine how many “fake or spam” accounts are on the social media platform.

“Twitter has failed or refused to provide this information. Sometimes Twitter has ignored Mr. Musk’s requests, sometimes it has rejected them for reasons that appear to be unjustified, and sometimes it has claimed to comply while giving Mr. Musk incomplete or unusable information,” the letter said.

Musk could be on solid legal ground, however, if Twitter had attempted to defraud him during the takeover process.

“A reverse breakup fee paid from a buyer to a target applies when there is an outside reason a deal can’t close, such as regulatory intermediation or third-party financing concerns. A buyer can also walk if there’s fraud, assuming the discovery of incorrect information has a so-called ‘material adverse effect.’ A market dip, like the current sell-off that has caused Twitter to lose more than $9 billion in market cap, wouldn’t count as a valid reason for Musk to cut loose — breakup fee or no breakup fee — according to a senior Mergers and Acquisitions lawyer familiar with the matter,” CNBC reported.

Meanwhile, CNBC analyst David Faber said that he actually believes Musk could wind up in prison because of the failed buyout deal.

“Then the question is: you are forcing Mr. Musk to buy the company, does he actually agree to do it?” the CNBC analyst said.

“There is this argument being said lately that, well, maybe he will not comply with that. Then we would have a situation where they could put him in jail,” he said.

That would be quite an unexpected turn of events and one would expect Musk would rather buy out the company than wind up behind bars. It would also be the first time in history that a social media user found himself in actual jail, rather than in ‘Twitter jail’ for defying the company.


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